scholarly journals Choice of an Exchange Rate Regime: the Role of Optimum Currency Area Theory

Competitio ◽  
2004 ◽  
Vol 3 (3) ◽  
pp. 21-40
Author(s):  
Julius Horváth
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Regime ◽  
Optimum Currency Area ◽  
Currency Area ◽  
Optimum Currency

Chancen und Risiken einer Dollarisierung in Argentinien

2003 ◽  
Vol 52 (1) ◽  
Author(s):  
Ralph Setzer
Keyword(s):  
Exchange Rate ◽  
Financial Integration ◽  
Exchange Rate Regime ◽  
The United States ◽  
Optimum Currency Area ◽  
Currency Board ◽  
Currency Area ◽  
International Investors ◽  
Strong Candidate ◽  
Optimum Currency

AbstractThe collapse of the Argentinean Currency Board revived the debate about the optimal exchange rate regime for Argentina. Given its large exposure to nervous international investors, Argentina is a strong candidate for dollarization, which could provide lower inflation and higher financial integration with the United States. However, Argentina’s poor qualifications for a fixed exchange rate under the traditional optimum currency area criteria and the absence of adequate labor market and fiscal policy structures indicate that dollarization would suffer from the same problems as the Currency Board system. Thus, dollarization, in advance of other fundamental reforms seems a risky strategy.

scholarly journals THE ROLE OF ASEAN EXCHANGE RATE UNIT (AERU) FOR ASEAN-5 MONETARY INTEGRATION: AN OPTIMUM CURRENCY AREA CRITERIA

2013 ◽  
Vol 15 (3) ◽  
pp. 59-88
Author(s):  
Dimas Bagus Wiranata Kusuma ◽  
Syed Mohammed Abud Ashif ◽  
Ali Musa Harahap ◽  
Muhammad Alam Omarsyah
Keyword(s):  
Exchange Rate ◽  
Monetary Union ◽  
Convergence Theory ◽  
Monetary Integration ◽  
Optimum Currency Area ◽  
Member States ◽  
Currency Area ◽  
National Currencies ◽  
Optimum Currency

The idea for regional monetary integration is grounded by the process of convergence theory within the member states. The paper analyses the possibility of monetary union in ASEAN-5 countries, Indonesia, Malaysia, Philippines, Thailand, and Singapore. In terms of volatility, by using nominal deviation indicator assessment, the ASEAN-5 currencies are suggested to peg their national currencies into Yuan since it empirically brings the lowest level of volatility, both during normal and crisis periods. Therefore, Yuan could be proposed as the anchor currency for ASEAN-5 countries. Moreover, valuing the AERU in terms of a weighed average of Yuan is important to determine which countries are considered to be an Optimum Currency Area (OCA). The results statistically suggest that all ASEAN-5 countries could be grouped as OCA according to exchange rate stability criterion.Keywords : Optimum Currency Area, AERU, ASEAN-5, Exchange Rate StabilityJEL Classification : D81, E52, F15, F36

scholarly journals THE ROLE OF ASEAN EXCHANGE RATE UNIT (AERU) FOR ASEAN-5 MONETARY INTEGRATION: AN OPTIMUM CURRENCY AREA CRITERIA

2013 ◽  
Vol 15 (3) ◽  
pp. 55-82
Author(s):  
Dimas Bagus Wiranata Kusuma ◽  
Syed Mohammed Abud Ashif ◽  
Ali Musa Harahap ◽  
Muhammad Alam Omarsyah
Keyword(s):  
Exchange Rate ◽  
Monetary Union ◽  
Stability Criterion ◽  
Convergence Theory ◽  
Monetary Integration ◽  
Optimum Currency Area ◽  
Currency Area ◽  
National Currencies ◽  
Optimum Currency

The idea for regional monetary integration is grounded by the process of convergence theory within the member states. The paper analyses the possibility of monetary union in ASEAN-5 countries, Indonesia, Malaysia, Philippines, Thailand, and Singapore. In terms of volatility, by using nominal deviation indicator assessment, the ASEAN-5 currencies are suggested to peg their national currencies into Yuan since it empirically brings the lowest level of volatility, both during normal and crisis periods. Therefore, Yuan could be proposed as the anchor currency for ASEAN-5 countries. Moreover, valuing the AERU in terms of a weighed average of Yuan is important to determine which countries are considered to be an Optimum Currency Area (OCA). The results statistically suggest that all ASEAN-5 countries could be grouped as OCA according to exchange rate stability criterion. Keywords : Optimum Currency Area, AERU, ASEAN-5, Exchange Rate StabilityJEL Classification : D81, E52, F15, F36

scholarly journals IMPLEMENTATION OF OPTIMUM CURRENCY AREA CRITERIA AND ITS VOLATILITY: CASE STUDY ASEAN-5+3

2010 ◽  
Vol 13 (2) ◽  
pp. 187-214
Author(s):  
Dimas Bagus Wiranata Kusuma ◽  
Arief Dwi Putranto
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Volatility ◽  
Economic Structure ◽  
Optimum Currency Area ◽  
Single Currency ◽  
Currency Area ◽  
Currency Exchange ◽  
Currency Exchange Rate ◽  
Optimum Currency

This paper is aiming to elaborate the case of how exchange rate volatility (ERV), which is supposedly considered to form optimum currency area (OCA), can be reduced in order justify the feasibility of the OCA idea within ASEAN5 plus three. Interestingly, the results provide some evidences that the ASEAN5+3 are considered not really ready to form OCA. It corroborates the existing opinion that the different in economic structure and its policies over foreign environment are becoming some barriers and challenging area to synchronize in the following time. The positive impacts AS to ERV which are incurred in ASEAN5+3 economies indicate the existence of inappropriate condition to form OCA since there are no similar shocks across a monetary union’s participating countries. Under such condition, it would foster the costs of forgoing the exchange rate as a shock absorbing mechanism. It deserves to argue that those observed countries still are resisting their existing regime since they are till believing that they begin to establish the system of monetary which are able to absorb any possible shocks in regards of their SIZE. In sum, the ASEAN5+3 countries are considered to fulfilling the requirement to form currency optimum area which are able to main their stable currency.JEL: D81, E52, F15, F36Key words: Optimum Currency Area, a Single Currency, Exchange Rate Volatility, Stability

scholarly journals PENERAPAN KRITERIA OPTIMUM CURRENCY AREA DAN VOLATILITASNYA: STUDI KASUS ASEAN-5 +3

2010 ◽  
Vol 13 (2) ◽  
Author(s):  
Dimas Bagus Wiranata Kusuma ◽  
Arief Dwi Putranto
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Volatility ◽  
Economic Structure ◽  
Optimum Currency Area ◽  
Single Currency ◽  
Currency Area ◽  
Currency Exchange ◽  
Currency Exchange Rate ◽  
Optimum Currency ◽  
Positive Impacts

This paper is aiming to elaborate the case of how exchange rate volatility (ERV), which is supposedly considered to form optimum currency area (OCA), can be reduced in order justify the feasibility of the OCA idea within ASEAN5 plus three. Interestingly, the results provide some evidences that the ASEAN5+3 are considered not really ready to form OCA. It corroborates the existing opinion that the different in economic structure and its policies over foreign environment are becoming some barriers and challenging area to synchronize in the following time. The positive impacts AS to ERV which are incurred in ASEAN5+3 economies indicate the existence of inappropriate condition to form OCA since there are no similar shocks across a monetary union’s participating countries. Under such condition, it would foster the costs of forgoing the exchange rate as a shock absorbing mechanism. It deserves to argue that those observed countries still are resisting their existing regime since they are till believing that they begin to establish the system of monetary which are able to absorb any possible shocks in regards of their SIZE. In sum, the ASEAN5+3 countries are considered to fulfilling the requirement to form currency optimum area which are able to main their stable currency.JEL: D81, E52, F15, F36Key words: Optimum Currency Area, a Single Currency, Exchange Rate Volatility, Stability

Optimum Currency Areas Past and Future

2018 ◽  
Author(s):  
Barry Eichengreen
Keyword(s):  
United States ◽  
Economic Theory ◽  
Monetary Union ◽  
The United States ◽  
Monetary Integration ◽  
Optimum Currency Area ◽  
Optimum Currency Areas ◽  
Currency Area ◽  
Optimum Currency

The literature on optimum currency areas differs from that on other topics in economic theory in a number of notable respects. Most obviously, the theory is framed in verbal rather than mathematical terms. Mundell’s seminal article coining the term and setting out the theory’s basic propositions relied entirely on words rather than equations. The same was true of subsequent contributions focusing on the sectoral composition of activity and the role of fiscal flows. A handful of more recent articles specified and analyzed formal mathematical models of optimum currency areas. But it is safe to say that none of these has “taken off” in the sense of becoming the workhorse framework on which subsequent scholarship builds. The theoretical literature remains heavily qualitative and narrative compared to other areas of economic theory. While Mundell, McKinnon, Kenen, and the other founding fathers of optimum-currency-area theory provided powerful intuition, attempts to further formalize that intuition evidently contributed less to advances in economic understanding than has been the case for other theoretical literatures. Second, recent contributions to the literature on optimum currency areas are motivated to an unusual extent by a particular case, namely Europe’s monetary union. This was true already in the 1990s, when the EU’s unprecedented decision to proceed with the creation of the euro highlighted the question of whether Europe was an optimum currency area and, if not, how it might become one. That tendency was reinforced when Europe then descended into crisis starting in 2009. With only slight exaggeration it can be said that the literature on optimum currency areas became almost entirely a literature on Europe and on that continent’s failure to satisfy the relevant criteria. Third, the literature on optimum currency areas remains the product of its age. When the founders wrote, in the 1960s, banks were more strictly regulated, and financial markets were less internationalized than subsequently. Consequently, the connections between monetary integration and financial integration—whether monetary union requires banking union, as the point is now put—were neglected in the earlier literature. The role of cross-border financial flows as a destabilizing mechanism within a currency area did not receive the attention it deserved. Because much of that earlier literature was framed in a North American context—the question was whether the United States or Canada was an optimum currency area—and because it was asked by a trio of scholars, two of whom hailed from Canada and one of whom hailed from the United States, the challenges of reconciling monetary integration with political nationalism and the question of whether monetary requires political union were similarly underplayed. Given the euro area’s descent into crisis, a number of analysts have asked why economists didn’t sound louder warnings in advance. The answer is that their outlooks were shaped by a literature that developed in an earlier era when the risks and context were different.

Sign in / Sign up

Export Citation Format

Share Document